New Pacific Metals - Unlocking Bolivia's Silver Potential with Two World-Class Discoveries

• New Pacific Metals has published a pre-feasibility study (PFS) for their Silver Sand project in Bolivia, showing an after-tax NPV of $740 million and 37% IRR at $24 silver.
• The company has made two major silver discoveries in Bolivia, with a combined resource of 400 million ounces of silver.
• New Pacific benefits from strong backing by major shareholders Silver Corp (27%) and Pan-American Silver (12%).
• The company emphasizes its 100% Bolivian team for local operations and engagement with stakeholders.
• New Pacific sees potential for silver demand growth from both investment and industrial applications, particularly in photovoltaics and electrification.

New Pacific Metals: Advancing Two Major Silver Discoveries in Bolivia

New Pacific Metals (TSX:NUAG) is emerging as a significant player in the silver mining sector, with two major discoveries in Bolivia that are capturing the attention of investors and industry experts alike. The company's flagship Silver Sand project has recently reached a crucial milestone with the publication of its pre-feasibility study (PFS), while its second project, Carangas, is advancing towards a preliminary economic assessment (PEA). With a robust financial position, strong backing from major mining companies, and a favorable outlook for silver, New Pacific Metals presents an intriguing opportunity for investors looking to gain exposure to the precious metals sector.

Interview with President & CEO, Andrew Williams

Silver Sand Project: A World-Class Discovery

The Silver Sand project stands out as New Pacific's most advanced asset, and the recently released PFS has highlighted its potential to become one of the world's premier undeveloped precious metals projects. Andrew Williams, President and CEO of New Pacific Metals, shared the headline numbers from the PFS:

"After-tax Net Present Value $740 million, that's at $24 silver, 37% IRR after tax, looking at the payback period under two years, and the other metric that we like to look at is the NPV relative to the initial capex, so that ratio is over two for the Silver Sand project and really puts it in a class of being one of the best, if not the best undeveloped precious metals projects anywhere in the world today."

These impressive economic indicators demonstrate the robustness of the Silver Sand project, even after rigorous scrutiny from engineers, metallurgists, and accountants. The project's ability to maintain its strong economics through various stages of study speaks to the quality of the discovery and its potential to deliver significant value to shareholders.

Carangas Project: A Promising Second Discovery

While Silver Sand takes center stage, New Pacific's Carangas project is also progressing well. The company expects to publish a preliminary economic assessment for Carangas in the coming months, which could potentially unveil another significant silver asset. The fact that New Pacific has made two major discoveries in a relatively short time frame is a testament to the company's exploration expertise and the prospectivity of its chosen jurisdiction.

Strategic Backing & Financial Strength

One of New Pacific's key advantages is its strong shareholder base, which includes two major players in the silver mining industry. Silver Corp holds a 27% stake in the company, while Pan-American Silver owns just under 12%. This backing not only provides financial support but also lends credibility to New Pacific's projects and approach.

The company's financial position is solid, with approximately US$15 million expected in cash reserves by the end of the year. This runway provides New Pacific with the flexibility to continue advancing its projects without immediate financing pressure.

Bolivia: An Underappreciated Mining Jurisdiction

While Bolivia may not be the first country that comes to mind for mining investment, New Pacific sees significant advantages in operating there. The country has a rich mining history dating back 500 years, and several successful mines have operated through different iterations of government. Williams emphasizes the importance of patience and relationship-building in navigating the Bolivian business environment:

"Going through the process, right from starting at the local community level right up to the very highest reaches of government, it's a process. It takes relationship building, that's one-on-one meetings and follow-ups and socialization and explaining the projects, flipping through presentations. All that work takes a huge amount of time."

New Pacific has taken a strategic approach by employing a 100% Bolivian team for its in-country operations. This local expertise, combined with support from experienced expats and the Vancouver-based management, creates a structure that effectively balances local knowledge with international mining experience.

The Silver Market: A Compelling Outlook

The fundamentals of the silver market provide an attractive backdrop for New Pacific's projects. Silver demand is driven by both investment and industrial applications, with the latter becoming increasingly significant. Williams explains:

"Silver is the best electrical conductor of any of the elements on the periodic table, and so you have to think that between photovoltaics and others, there's going to be new and novel uses of silver that will be arising as we're moving along this electrification trend across the world."

The growth in demand from sectors such as photovoltaics and electric vehicles, combined with silver's monetary aspects, creates a potentially explosive mix for silver prices. Importantly, the supply side of the equation is constrained, as 75% of silver is produced as a byproduct of other metals, limiting the ability of the market to respond quickly to increased demand.

Project Economics & Development Path

The Silver Sand project's economics are particularly attractive, with a capital expenditure of approximately $360 million and a sub-two-year payback period at $24 silver. The project's high-grade nature in its early years, producing about 15 million ounces of silver annually for the first three years, makes it highly financeable.

As New Pacific advances towards project development, it has various options to consider. The company could pursue project financing through a combination of debt and equity, or it might attract interest from larger mining companies looking to acquire high-quality development assets. The involvement of Silver Corp and Pan-American Silver as major shareholders adds an interesting dynamic to potential future developments.

Challenges & Considerations

While New Pacific's story is compelling, investors should be aware of potential challenges. The company will need to navigate the permitting process in Bolivia, which hasn't seen a new large-scale open-pit mine permitted in some time. Additionally, the silver market's volatility and the potential for substitution in some industrial applications should be considered when evaluating the long-term outlook for silver demand.

Conclusion

New Pacific Metals stands out in the silver mining sector with its two major discoveries in Bolivia. The company's Silver Sand project demonstrates robust economics, while the upcoming PEA for the Carangas project could unveil additional value. Backed by industry majors and led by an experienced team, New Pacific is well-positioned to advance its projects in a jurisdiction that offers both challenges and opportunities. As the global demand for silver continues to grow, particularly in industrial applications, New Pacific's large resource base and advancing projects make it an attractive option for investors seeking exposure to the silver market. However, investors should remain mindful of the risks associated with mine development in Bolivia and the inherent volatility of the silver market.

The Investment Thesis for New Pacific Metals

• High-quality assets: Two major silver discoveries with a combined resource of 400 million ounces.
• Strong economics: Silver Sand PFS shows $740 million NPV and 37% IRR at $24 silver.
• Strategic backing: Support from major shareholders Silver Corp (27%) and Pan-American Silver (12%).
• Favorable silver market outlook: Growing industrial demand coupled with investment appeal.
• Experienced management: Strong local team in Bolivia with international mining expertise.
• Potential catalysts: Upcoming PEA for Carangas project and further advancement of Silver Sand.
• Undervalued jurisdiction: Bolivia offers potential for lower costs and less competition.

Macro Thematic Analysis

The silver market is poised for potential significant growth, driven by a unique combination of investment demand and expanding industrial applications. Unlike gold, which is primarily driven by investment demand, silver maintains a dual role as both a precious metal and an industrial commodity.

On the investment side, silver benefits from many of the same factors that drive gold demand, such as inflation concerns and currency debasement. However, silver often exhibits more volatility than gold, potentially offering higher returns in bull markets.

The metal truly shines in the industrial aspect of silver demand. Silver's unparalleled electrical conductivity makes it an essential component in various technologies as the world moves towards electrification and renewable energy. The photovoltaic sector, in particular, has seen consistent growth in silver demand, often surpassing projections. The increasing complexity of electric vehicles also contributes to rising silver consumption.

What makes the silver market particularly interesting is the potential for supply constraints. With 75% of silver produced as a byproduct of other metal mining operations, there's limited ability for supply to quickly respond to increased demand. This dynamic could lead to significant price volatility if demand outpaces supply growth.

Andrew Williams, CEO of New Pacific Metals, succinctly summarizes the opportunity:

"When you combine that very strong macro backdrop with the fact that most of it produces a byproduct meaning a muted supply response, I think it really creates some combustible conditions for the silver price."

This potential for explosive price movement, coupled with growing industrial applications, makes silver an intriguing commodity for investors. Companies with large, high-quality silver resources, like New Pacific Metals, are well-positioned to benefit from these macro trends. However, investors should remain aware of the potential for price volatility and the ongoing evolution of industrial technologies that could impact long-term demand.